SIQ Smart Group Strategic Valuation

Smart group presented a mostly 'as expected' H1FY22 profit result.
I was curious as to the degree to which the shares sold off on the announcement.

SIQ appears reasonably valued, however the market is unlikely in my opinion to chase the share price upwards given the loss of a major contract.

The loss of the major contract implies (at least from the analysts I am following) that earnings will not start to increase again until FY25.
This is further reinforced by management commentary about both short and medium term headwinds.

The underlying SIQ business is good quality in my opinion. This is highlighted by consistently high historic RoE and RoIC over long periods of time.

The problem is that the book value is only around $2. So the market realises the underling company is of high quality and so is paying a multiple of 3 times the book value. Therefore in my opinion, the market is already capturing the 'good quality underlying company' in the share price.

In order for future share price returns, the company will need to grow earnings (which then at the high multiple of RoE and RoIC generate high returns on each additional sales). The problem is that expected growth in earnings now look like won't start for another 2 years.

Hence why I think the market pushed down the share price, the market is not prepared to hang around and wait 2 years.

Expected future dividends have also been reduced.

I bought SIQ back in the Macro June Share stock sale. But based on the results I will wait until adding more, unless the share price drops significantly.

All my opinions, and interested in other peoples opinion, especially as SIQ is a good quality business. (Although MMS which I also hold is better quality).